What Goes Into an Appraisal?

Getting real estate is the biggest financial decision most people may ever consider. It doesn't matter if a primary residence, a second vacation property or an investment, the purchase of real property is an involved transaction that requires multiple people working in concert to pull it all off.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the bank provides the money required to bankroll the deal. And the title company sees to it that all details of the transaction are completed and that the title is clear to pass from the seller to the purchaser.

To learn more about appraising, click here to see a short video or call us today to talk about your specific property.

So, what party makes sure the property is worth the amount being paid? In comes the appraiser. We provide an unbiased opinion of what a buyer might expect to pay — or a seller receive — for a parcel of real estate, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Richard E. Turner will ensure, you as an interested party, are informed.

Inspecting the subject property

To ascertain the true status of the property, it's our responsibility to first conduct a thorough inspection. We must actually view aspects of the property, such as the number of bedrooms and bathrooms, the location, amenities, etc., to ensure they really exist and are in the condition a reasonable buyer would expect them to be. The inspection often includes a sketch of the house, ensuring the square footage is correct and conveying the layout of the property. Most importantly, we identify any obvious features - or defects - that would affect the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

Here, we gather information on local building costs, labor rates and other elements to determine how much it would cost to build a property comparable to the one being appraised. This estimate often sets the maximum on what a property would sell for. The cost approach is also the least used method.

Sales Comparison

Appraisers can tell you a lot about the subdivisions in which they appraise. They innately understand the value of certain features to the people of that area. Then, the appraiser looks up recent sales in close proximity to the subject and finds properties which are 'comparable' to the property at hand. Using knowledge of the value of certain items such as fireplaces, room layout, appliance upgrades, extra bathrooms or bedrooms, or quality of construction, we adjust the comparable properties so that they are more accurately in line with the features of subject property.

  • If, for example, the comparable has an extra half bath that the subject does not, the appraiser may deduct the value of that half bath from the sales price of the comparable.
  • However, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

In the end, the appraiser reconciles the adjusted sales prices of all the comps and then derives an opinion of what the subject could sell for. When it comes to valuing features of homes in LITTLE ROCK and Pulaski, Richard E. Turner is second to none. The sales comparison approach to value is commonly given the most importance when an appraisal is for a home purchase.

Valuation Using the Income Approach

In the case of income producing properties - rental houses for example - the appraiser may use a third way of valuing a property. In this case, the amount of income the property yields is factored in with income produced by comparable properties to determine the current value.

Arriving at a Value Conclusion

Examining the data from all applicable approaches, the appraiser is then ready to stipulate an estimated market value for the subject property. The estimate of value at the bottom of the appraisal report is not always the final sales price even though it is likely the best indication of a property's valueDepending on the individual situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.But the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could recover in case they had to put the property on the market again. At the end of the day, an appraiser from Richard E. Turner will help you discover the most accurate property value, so you can make the most informed real estate decisions.